Spanish-owned Abbey charges ahead on the High Street with perks

A new current account war is set to rage as High Street giant Abbey launches its first packaged account.

The Spanish-owned bank has already taken a 28 per cent share of new mortgage lending this year, acquired Bradford & Bingley, seen savers' deposits increase by 70 per cent and hopes to lure current account customers from rivals.

Lloyds TSB is the biggest player in this area, with around 11million accounts. Abbey has around three million, but hopes the two fee-charging accounts giving benefits to travellers or families will win new customers.

Launched today, each costs £15 a month, and pays an in-credit interest rate of 3.2 per cent after 20 per cent savings tax (4 per cent before tax) on the first £2,500. Above this, it pays just 0.08 per cent (0.1 per cent). There is an interest-free overdraft of £100 - more than this, the overdraft rate is 12.9 per cent.

Battle: Spanish-owned Abbey will take on rivals

On the new Travel Reward account there is multi-trip worldwide travel insurance, Green Flag European motoring assistance and commission-free travel money. It also provides an Airport Angel service, which among other things allows access to airport VIP lounges, leisure and travel benefits.

The Family Reward account has UK breakdown cover, legal advice, will-writing and identity protection. There is also key protection, which provides you with a new set of keys and locks if you lose them.

With both accounts there is a free gift of either a week's accommodation for a family, free flight to Europe, or a pamper day at a top hotel. On top of this, Abbey's website also has vouchers and discounts for holidays and days out. The accounts are available only online.

The bank has promised to review the benefits on offer in the accounts and change them if customers are not taking full advantage.

Steve Shore, head of banking for Abbey, says: 'The biggest criticism of packaged accounts is people do not want or need the things they get with them. We want to make sure they do by tailoring them to their lifestyle. We will monitor what customers use and make changes where necessary.

'Abbey wants to be a big player in current accounts and take ourselves beyond being a savings and mortgages institution. By breaking in to this area, it completes the package.'

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Banks have increasingly moved towards packaged accounts, or added value, as they like to call them. Lloyds TSB has four that normally cost from £7.95 to £25 a month, but are on offer allowing customers to pay between £3 to £17 a month for the first three months. The nearest comparable ones to Abbey's are its Platinum and Premier service which cost respectively £17 and £25 a month.

When packaged accounts were first launched there were complaints from many standard current account customers that they had been moved over to the fee-paying account without their knowledge.

As a result, many customers paid a monthly fee without getting any benefits. Some banks were forced to give bulk reclaims to customers moved to a fee-charging account without their knowledge.

Before taking out a packaged account, you need to figure out whether you really will actually use the added features.

And don't be fooled by what the banks claim the benefits are worth. Frequently, the price comparison that banks use when demonstrating the value of the benefits you receive is rarely match up to the best deals on the market. Abbey, for instance, claims its multi-trip worldwide family travel insurance including winter sports is worth £150. Lloyds claims its is worth up to &pound;270 a year, Natwest £160, Halifax £188.34, Barclays £160, and HSBC £180.

Direct Travel's Platinum policy, however, offers better cover in most aspects of the policy for £123.

You also need to ensure other benefits do not duplicate what you would get free anyway. For example, Abbey's key protection policy is already part of some home insurance policies.